Obamacare regs force medical business out of downtown Pottstown

POTTSTOWN — A medical equipment supply business that has been quietly thriving in downtown Pottstown is set to move the bulk of its operation to Oaks this spring, taking as many as 75 jobs with it.

Royal Medical Supply’s 34 E. High St. location will remain open and return to its original purpose, a showroom, said Roy Repko, who founded the company in Royersford in 1984 with his father-in-law and brother-in-law.

Even as late as the 1990s, the majority of its business was comprised of referrals from Pottstown Memorial Medical Center, Phoenixville Hospital and the Pottstown Area Visiting Nurse Association.

But now it’s the big providers: Medicaid, Medicare, Blue Cross, Aetna, Cigna and United Health Care.

Advertisement

And although Repko said he has no desire to leave Pottstown, the vast changes coming to the health care industry as the result of the Affordable Health Care Act, coined “Obamacare,” leave Repko and his partners little choice, he explained.

It’s a complicated situation, with many factors, Repko said, “but at the end of the day, without Obamacare, we would still be in town.”

Central to his dilemma, Repko explained, are the reimbursement rates which will affect Medicare and Medicaid, which comprise such a sizeable part of his business.

By allowing bidders from anywhere in the nation, many of which are more inclined to sell their winning bids to area providers than service them from afar, the process by which the reimbursement rates were set dropped the amount his business will be paid for equipment by 45 percent, he said.

“So, for example, say providing a wheelchair costs me $100, we’ll now get $55 even though nothing else changes on my end,” Repko said. “I still have to pay someone to process the order, and pay someone to deliver it.”

Few businesses can survive that kind of bite out of their bottom line; in fact Repko calls it “suicide pricing.”

“We knew a drop was coming and we were hoping for 30 percent, thinking maybe it would be 32 percent, but not 45 percent,” Repko said.

Those reimbursement rates, Repko said, will go into effect this year and be in place for three years before they get reconsidered.

By then, he predicted, many medical equipment suppliers will have gone out of business and the government will have little choice but to reconsider the policy.

As those medical equipment suppliers collapse under the unsustainable rate structure, patients will find it harder and harder to get the equipment they need outside of the hospital, Repko predicted.

“It’s a shame because with the right kind of equipment, we can treat a patient at home for a full year for what it’s going to cost Medicare to keep them in a hospital or extended care facility for just one month,” Repko said.

Nevertheless, Repko and his partners intend to be among those left standing in three years when the rates are revisited.

And, since Repko said they have no plans for cutting jobs, that means cutting costs and watching every penny — including transportation and office overhead.

He explained that the new health care rules set up Medicaid and Medicare service areas and the one Royal Medical must now serve stretches from Cecil County, Maryland, up through the Lehigh Valley and across to New Jersey “just south of New York City,” said Repko.

That requires a more central location.

“I hate to use this phrase, but it applies, it means we need to look at economies of scale,” said Repko. “That means we needed a location, given our service area, with easy access to 476, 276, 422, 76 and 95,” he said of the major highway arteries in the area.

The location that fits that bill is in Oaks, he said, in the same complex that houses the Oaks Expo Center.

“This industry is going to consolidate dramatically,” Repko said, noting that Royal Medical has already combined with a dozen previous competitors in several Pennsylvania and New Jersey locations in preparation for the changes which were actually intended to promote competition — not consolidation.

Sadly, before the new federal rules became an overwhelming factor, Royal Medical was looking to expand — in Pottstown.

“We’ve been looking for new space for three years,” said Repko. “We looked at several locations, the old Gudebrod building, in the Circle of Progress and the old Dames Chevrolet, so we could stay downtown. We tried to do everything we could to stay in Pottstown.”

And while they will remain, as a showroom, it will be with only a handful of jobs.

The bulk of those jobs will head down Route 422 to Oaks.

Although the showroom remaining means there will be no loss in property taxes to the borough or the school district, the real loss to the local economy comes with the loss of the money those employees spent in downtown businesses.

“We spent a lot of money downtown,” said Repko. “We encouraged our employees to buy their suits at Weitzenkorn’s, to eat at Grumpy’s and The Brick House.”

“We’re very sad to see them go,” said Sheila Dugan, the executive director of the Pottstown Downtown Improvement District Authority.

“They were very loyal to downtown businesses and now we need to get to work trying to replace those customers,” she said.

“We’re working on marketing plans to being more businesses and more customers downtown so we can get out of this pattern. We have to stop taking one step forward and two steps back,” Dugan said.

“The TriCounty Area Chamber of Commerce is sorry to see a local business relocate a portion of their workforce out of the downtown,” said chamber president Eileen Dautrich. “However, we understand the reality of businesses reorganizing and we are glad to hear that Royal Medical is remaining within the tri-county area region.”

Steven Bamford, executive director at Pottstown Area Industrial Development Inc. and the man charged with bringing new businesses into the borough, and retaining those already here, called the move “hugely disappointing.”

He said he worked with Repko to see if there was anything that could be done to keep Royal in Pottstown, but, like his colleagues, Bamford said he understood the “macro forces and work in that industry” make the move difficult to avoid.

Repko said there is still “a remote chance to salvage the situation” and reverse those “macro forces.”

Several organizations have banded together to create a site to petition The White House for a different method for determining prices.

Available at www.savepatientaccess.com, the site notes that “244 of the top competitive bidding experts, including five Nobel Laureates, called the program ‘fatally flawed.’ A failed program will limit area providers, product choice and increase government spending.”

The site promotes an alternative to bringing prices down, called a Market Pricing Program, which, proponents argue, will not undermine so many businesses.

But Repko wasn’t kidding when he said the chances were remote.

With just over 5,800 signatures on Friday, the site still needs 94,198 more signatures by April 17 in order to garner an official response from The White House.

“It’s really unfortunate,” Repko said. “There’s a better way to do this and still save money. Ultimately, this is going to cost patients more and it’s going to cost taxpayers more.”

About the Author

Evan Brandt has worked for The Mercury since November 1997. His beat includes Pottstown, the surrounding townships and the Pottstown and Pottsgrove school districts, as well as other varied general topics like politics, the environment and education. Reach the author at ebrandt@pottsmerc.com
or follow Evan on Twitter: @PottstownNews.